The markets are back playing defense once again. Investors have turned risk-averse thanks to the Fed’s signaling additional rate hikes for the year to the current geopolitical climate in Russia. In times like this, quality companies with a proven track record of weathering out economic downturns and macro-related events shine. Quality companies stand the test of time and provide income to investors waiting for growth themes to return to the market. Such companies are those that belong to the coveted Dividend Aristocrats list. But, just because a company is on the Aristocrats list doesn't necessarily mean it's worth buying.
What are Dividend Aristocrats?
Dividend Aristocrats are companies that have not only paid dividends consistently for at least 25 years but have also increased their dividends yearly for that same period. It's generally accepted that this exclusive group of companies has earned their place as some of the most reliable dividend-paying stocks in the market.
How do dividend stocks help investors fight inflations and market downturns?
History has repeatedly shown that owning stocks during inflation performs well over the long term as they tend to increase alongside consumer prices. However, stock dividends protect against market uncertainty and inflation thanks to their increasing dividend payouts, long-term performance, and stability. Companies that have consistently increased their dividends during inflationary periods tend to outperform the broader market, offering a hedge against rising prices and a stable income stream.
We always say, "Do your due diligence," - and today, we'll look at some of the high-yielding dividend aristocrats right now.
The 3M Company (MMM)
Well known for Post-It notes, the 3M Company is a conglomerate with operations in more than 70 countries that have been founded since 1902. Throughout the years, the company has expanded its product line and has created and marketed a range of goods and services in four different segments:
- Consumer,
- Safety & Industrial.
- Transportation and electronics
- Health care
Abrasives, artificial bonds, videotapes, and particular safety gears are under its Safety and Industrial segment. Transportation safety equipment and systems for the automotive and aerospace sectors are in its Transportation and Electronics segment. Oral care, medical diagnostics, and health information systems are included in its Health Care Segment. Consumer health and safety products, consumer respirators, office inventories, etc., are included in its Consumer Care Segment.
3M's stock price has suffered recently, as its trading price hasn't been seen since 2012. This is due to its potential $20 Billion in lawsuits stemming from its apparently failed earplugs and pollution allegations.
It should be noted that MMM has an annual dividend yield of 5.96% and a 5-year dividend growth rate of 26.81% and has consecutively increased its dividends for more than 66 years.
Analyst Rating
Analysts rate MMM as a “Hold” based on 1 Moderate sell, 3 Strong sells, and 10 Holds from analyst recommendations. The mean target is set at $114.38, and a high target of $155.00, representing a potential upside of 57.74%.
Walgreens Boots Alliance (WBA)
Walgreens Boots Alliance is a consumer staples company operating in healthcare, pharmacy, and retail and has a portfolio of consumer brands that includes Walgreens and Boots. Today, WBA offers products in three main segments, which include:
- U.S. Retail Pharmacy
- U.S. Healthcare
- International
Its U.S. Retail Pharmacy segment provides offers health and wellness services and operates its retail drug stores. The international segment operates non-U.S. pharmacy-led health and beauty retail businesses. The U.S. Healthcare segment is a consumer-centric healthcare business that uses technology to engage consumers across their care journey.
Walgreens dropped 11.58% in the past 5 days as its most recent earnings release failed to meet analyst expectations- thanks to it's healthcare unit citing not ‘selling’ enough COVID-19 vaccines. Not only that, Walgreens' free cash flow has dropped 85% over the past 5 years. And that begs the question: will they have enough money to continue increasing (or even paying) dividends?If Walgreens can return to growth, investors can expect the stock to pop and yields to come back to earth. In fact, target prices (below) point to a potential 81.56% upside.WBA has an annual dividend yield of 6.11% and a 5-year dividend growth rate of 24.84% and has consecutively increased its dividends for 47 years.
Analyst Rating
Analysts rate WBA as a “Hold” based on 3 Strong buys,10 Holds, 1 Moderate sell, and 1 Strong sell recommendation. The mean target price is $39.77, with a high price of $52.00, a potential upside of 81.56%.
Final Thoughts
“Buy when others are fearful” is a famous quote investors hear in times of uncertainty as some of the most successful and high-profile investors have been quoted to have made a lot of money by buying stocks during times when other investors have started to walk away. However, investors should always practice prudence in market distress and exercise proper risk management when choosing stocks with high dividend yields and potential upside.
On the date of publication, Rick Orford did not have (either directly or indirectly) positions in any of the securities mentioned in this article. All information and data in this article is solely for informational purposes. For more information please view the Barchart Disclosure Policy here.
